Pepperfry: Making Pepperprofitable

Transcription

1 Pepperfry: Making Pepperprofitable EAST COAST GLOBAL CONSULTING

2 Agenda Challenge Key Issues & Objectives Recommendation Analysis Alternatives Implementation Plan Financials Risks & Mitigations What Success Looks Like Delia Chelsey Allison Jennifer Delia EAST COAST GLOBAL CONSULTING 2

3 Challenge Be EBITDA positive in months. EAST COAST GLOBAL CONSULTING 3

4 Key Issues Loss-making company Under-utilized capacity Increasing competition Unorganized industry EAST COAST GLOBAL CONSULTING 4

5 Key Objectives Increase profitability Strengthen brand and leadership position Respond to competition Maintain value proposition EAST COAST GLOBAL CONSULTING 5

6 Recommendation Improve supply chain efficiencies by repurposing sourcing hub into fulfillment center and maximizing short haul delivery capacity. EAST COAST GLOBAL CONSULTING 6

7 Analysis DELIA WARREN

8 Target Market Modern, tech-savvy, upwardly-mobile, young professionals in cities EAST COAST GLOBAL CONSULTING 8

9 Indian Furniture Market OPPORTUNITIES: Largely disorganized 10 km shopping radius Target market growing rapidly Changing purchasing behaviours Strong loyalty to local producers THREATS: Market highly fragmented Big players entering market Skepticism re: quality, delivery, assembly Lower than average access to technology Disruption of Indian furniture market holds HUGE potential EAST COAST GLOBAL CONSULTING 9

10 Pepperfy s Unique Position STRENGTHS: Unique value proposition Excellent data management Strong relationships Better margins Transportation record: <2% damaged goods 92% first time delivery rate WEAKNESSES: Loss-making company Broad focus auxiliary services are costly Complicated long-haul delivery Utilities are low margin Trim the fat - Focus on CORE competencies EAST COAST GLOBAL CONSULTING 10

11 Competitive Landscape Competitor IKEA Amazon India Flipkart Pepperfry Offering Outside player Large retail space (costly) Non-local product offering Outside player Broad product offering Broad product offering Big box products Local artisan focus Curated product listing Value proposition: Variety, value, LOCAL EAST COAST GLOBAL CONSULTING 11

12 Financial Snapshot JENNIFER BUT TON

13 Financial Snapshot Revenue Increasing, Profits Decreasing Goal to be EBITDA Positive in Months EAST COAST GLOBAL CONSULTING 13

14 Financial Snapshot Operating Costs approximately 5 Million in 2016/2017 Double Revenue Important to Grow Revenue & Cut Costs Revenue Growth Opportunities Need to take Cost Cutting measures Supply Chain costs initially 20-25% of Cost of Goods Sold (COGS). Now at 8-10% COGS through optimization Need to Pave the Way for an IPO EAST COAST GLOBAL CONSULTING 14

15 Financial Snapshot GMV- Merch sold over customer exchange site Goal to increase GMV Seven Fold to 50,000 million in 2020 EAST COAST GLOBAL CONSULTING 15

16 Financial Snapshot 1/3 of Annual Costs allocated to Décor & Utilities Seen as intro items to draw in consumers Product Revenue % of Gross Margin % of Transactions Furniture 80% 45 %-55 % 30% Décor 20% 30 %-50 % 70% Utilities 5 %-25% EAST COAST GLOBAL CONSULTING 16

17 Alternatives CHELSEY PIKE

18 Alternatives 1 Make More Money 2 Cut Big Cost 3 Better Utilize Existing Channels EAST COAST GLOBAL CONSULTING 18

19 Alternative 1: Make More Money Increase Sales Volume / Increase Price Advantages Increase in revenue No items sold at loss Disadvantages Already performing well in terms of sales Price sensitive customer Does not address operating practices EAST COAST GLOBAL CONSULTING 19

20 Alternative 2: Cut Big Cost Axe Delivery Services Advantages Elimination of 400 trucks, drivers & other direct cost Focus on core business Disadvantages Demographic challenges Unique products and services Transportation is a key differentiating factor EAST COAST GLOBAL CONSULTING 20

21 Alternative 3: Utilize Existing Channels Streamline Supply Chain / Max. Short-Haul Delivery Capacity Advantages Existing capacity Builds on Pepperfry competencies Eliminates inefficiency Creates excitement around online furniture purchases Disadvantages Risk of competitor disruption EAST COAST GLOBAL CONSULTING 21

22 Decision Matrix Increase profitability Strengthen brand & leadership position Respond to competition Maintain value proposition Make Money Cut Cost Efficiency EAST COAST GLOBAL CONSULTING 22

23 Recommendation Improve supply chain efficiencies by repurposing sourcing hub into fulfillment center and maximizing short haul delivery capacity. EAST COAST GLOBAL CONSULTING 23

24 Implementation Plan ALLISON PENTON

25 Implementation Plan Improvements in Supply Chain Maximize Pepcart s Delivery Capacity Axe Utilities Extensive Marketing Campaign to Grow Sales Expand Franchise Model EAST COAST GLOBAL CONSULTING 25

26 Timeline Phase 1: 0-12 months Improvements in supply chain Maximize Pepcart s delivery capacity Phase 2: months Focus on décor and furniture Roll out digital marketing campaign Phase 3: months Expand franchise model EAST COAST GLOBAL CONSULTING 26

27 Phase 1 Supply Chain Sourcing PepperfryHub/Warehouse Fulfillment Center Suppliers Long haul movement Fulfillment Centers Pepperfry Fulfillment Center Distribution Center EAST COAST GLOBAL CONSULTING 27

28 Phase 1 Pepcart Push Offer delivery services to other companies for transporting large electrical goods 100% Utilize 400 trucks Sign contract with Pepcart Companies must delivery items to the Pepperfry s delivery warehouse Delivery Capacity EAST COAST GLOBAL CONSULTING 28

29 Phase 2 Axe Utilities Creates more efficiencies by removing low margin products Increased focus on high performing product categories Pepcart still delivers utilities through auxiliary services EAST COAST GLOBAL CONSULTING 29

30 Phase 2 Marketing Video Mini Series CSR Entrepreneurial Highlight Craftsmanship Emphasize Artisinal Value EAST COAST GLOBAL CONSULTING 30

31 Phase 2 Marketing Made Locally, Loved Locally EAST COAST GLOBAL CONSULTING 31

32 Phase 3 Expand Franchisee Model 16 new studios by 2025 Pepperfry defines interior store design Stores dictate showcase items 1, 000-1,500 square feet Existing New Franchisees EAST COAST GLOBAL CONSULTING 32

33 Talent Management Strong vetting of new franchisee owners with aligned values In-house interior design consultants EAST COAST GLOBAL CONSULTING 33

34 Financials Risks & Mitigations JENNIFER BUT TON

35 Financial Analysis Revenue 2,580 2,967 3,412 3,753 4,129 4,541 4,996 Ad Franchise Fee Revenue Ad New Store Revenue Ad Delivery Service Revenue Less: Utility Revenue (1) (1) (1) (1) (1) (1) Total Revenue 2,580 3,001 3,469 3,838 4,242 4,682 5,171 Double Revenue by Adding 16 Franchise Stores to 2023 & Delivery Service Organic Revenue Growth Year over Year 10-15% EAST COAST GLOBAL CONSULTING 35

36 Financial Analysis Increased Traffic from New Stores & Growth will increase GMV to 50,000 by EAST COAST GLOBAL CONSULTING 36

37 Financial Analysis Operational Cost Improvements Improved Supply Chain 1,000 1,500 1,500 2,000 Dropping Utilities 1,000 1,000 1,000 1,000 Gross Margin ,242 EBITDA Return to Profitability by 2019 Return to Positive EBITDA by Q EAST COAST GLOBAL CONSULTING 37

38 Where is the money coming from? Funds required Marketing 300 Talent Management 500 Logistics 150 Total 950 Equity Investment Success with IPO EAST COAST GLOBAL CONSULTING 38

39 Risks & Mitigations Competition Medium risk Focusing on target audience and providing locally sourced artisanal products Insufficient Cost- Cutting Measures Lack of Sales Growth Low risk Off-set by increase in revenue stream and constant evaluation of supply chain Low risk Increased marketing campaign and loyal customer base EAST COAST GLOBAL CONSULTING 39

40 Conclusion DELIA WARREN

41 What Success Looks Like Increase profitability Strengthen brand and leadership position Respond to competition Increased supply chain efficiency; additional revenue streams EBITDA position by Q Capitalizing on core competencies Expanding franchisees studios Focused on value proposition: Made Local, Loved Local Maintain value proposition Continuing to offer unique artisanal products EAST COAST GLOBAL CONSULTING 41

42 Questions? THANK YOU!

43 Contingency Plan Expand delivery services to Sri Lanka Booming population Neighboring country Cultural similarities EAST COAST GLOBAL CONSULTING 43